Coffee Market Report October 10 2018

The Vietnam Customs Department have reported that the countries coffee exports for the month of September were lower than originally forecast, to be registered at 2,011,083 bags.   This number they say has contributed to the country’s cumulative coffee exports the first nine months of this year, to be 18.8% higher than the same period in the previous year, at a total of 24,116,667 bags. 

The Vietnam Customs Department have further reported that this has contributed to the country’s coffee exports for the October 2017 to September 2018 coffee year to have been 12.3% higher than the previous coffee year, at a total of 29,916,667 bags. 

Vietnam is now poised for the start of the new crop harvest, which should be well underway within the next few weeks, with mixed forecasts coming to the fore in terms of the size of this new crop but with most still looking towards another large crop.   But with Brazil having harvested a significantly larger new conilon robusta coffee crop this year and potentially due to export between four to five million bags of these coffees, it shall provide for some degree of competition for the Vietnam robusta coffees over the coming months. 

There are concerns though being voiced within the internal market in Brazil over the relatively soft prices that are being dictated by the relatively low value reference prices of the international markets, which with the Brazil Real having firmed against the U.S. dollar are pressuring internal market prices lower.   This has triggered the Brazil Farmers Confederation to approach the Ministry of Agriculture in Brazil to look to direct funding towards assisting farmers to finance the carry of coffee stocks, which shall reduce the pressure to sell of stocks to pay farm debts.   

The Colombian Government and with approximately 540,000 farming families related to coffee are meanwhile already taking active steps to provide finance to assist coffee farmers, but with farm gate prices for many coffee farmers reported to be below cost, it is a complicated issue to find sufficient finance to truly eliminate the negative effects of soft international coffee prices. 

Meanwhile the International Coffee Organisation who had forecast a global coffee deficit supply of 3.56 million bags for the just completed October 2017 to September 2018 coffee year, have revised this and reported that there was in fact a global surplus coffee supply over this period of 2.58 million bags.   This report and ahead of the increased surplus supply that is due for the new October 2018 to September 2019 coffee year that comes with the recently completed bumper Brazil crop, will surely contribute towards the prevailing bearish sentiment within the coffee markets.   Despite the recent short covering positive correction within the markets, which has assisted to buoy prices in the recent days. 

The January 2019 to December 2018 contracts arbitrage between the London and New York markets broadened yesterday, to register this at 35.86 usc/Lb., while this equates to 31.69% price discount for the London Robusta coffee market.   

The Certified washed Arabica coffee stocks held against the New York exchange were seen to increase by 2,870 bags yesterday; to register these stocks at 2,413,276 bags.  There were meanwhile a smaller in number 507 bags decrease in the number of bags pending grading for this exchange; to register these pending grading stocks at 57,521 bags. 

The Certified Robusta coffee stocks held against the London exchange were seen to decrease by 3,500 bags or 0.24% over the week of trade leading up to Monday 8th. October, to see these stocks registered at 1,450,000 bags, on the day. 

The commodity markets were mixed in trade yesterday, but with many markets showing some degree of buoyancy, to see the overall macro commodity index taking an upside track for the day.    The Oil, Natural Gas, Sugar, Cocoa, Coffee, Copper, Wheat, Gold and Silver markets ended the day on a positive note, while the Cotton, Orange Juice, Corn and Soybean markets ended the day on a softer note.  The Reuters Equal Weight Continuous Commodity Index that is made up from 17 markets is 0.22% higher; to see this index registered at 417.15.   The day starts with the U.S. Dollar steady and trading at 1.317 to Sterling, at 1.150 to the Euro and with the dollar buying 3.716 Brazilian Real, while North Sea Oil is showing a degree of early buoyancy and is selling at US$ 85.20 per barrel. 

The London market ended the day on a positive note and with 40% of the earlier gains of the day intact, while the New York market ended the day on a very positive note and with 83.9% of the earlier gains of the day intact.   This close and with the Brazil Real remaining firm, is likely to inspire some degree of confidence and to set the markets for a steady start for early trade today against the prices set yesterday, as follows: 

LONDON ROBUSTA US$/MT                       NEW YORK ARABICA USc/Lb. 

NOV   1693 + 9                                               DEC    113.15 + 1.30

JAN    1704 + 4                                               MAR   116.70 + 1.35

MAR   1718 + 5                                               MAY   119.15 + 1.35

MAY   1732 + 5                                                JUL    121.50 + 1.35

JUL    1745 + 3                                                SEP    123.80 + 1.35

SEP    1759 + 3                                                DEC   127.15 + 1.30

NOV   1773 + 3                                                MAR   130.40 + 1.30

JAN    1787 + 3                                                MAY   132.45 + 1.30

MAR   1803 + 3                                                JUL    134.20 + 1.25

MAY   1815 + 3                                                SEP    135.95 + 1.25